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    Data reveals Spanish economy is flirting with recession

    AFP
    31 Ekim 2008 - 14:00Son Güncelleme : 31 Ekim 2008 - 14:00

    The Spanish economy, which has been hard hit by a property slump and the global financial crisis, contracted 0.2 percent in the third quarter from the second, the Bank of Spain said on Friday.

    If confirmed by the National Statistics Institute (INE), it would be the first negative growth in gross domestic product since the second quarter of 1993.

     

    The figure bears out widespread expectations that the once fast-growing economy is now flirting with recession, defined as two quarters running of contracting output.

     

    "The marked deterioration of international financial markets since mid-September has exacerbated the prevailing uncertainty ... and has given rise to a further tightening of financing conditions," the central bank said.

     

    "Under these circumstances, the estimates made, drawing on available information, suggest that the year-on-year growth rate of GDP in Q3 declined by 0.9 percentage points to 0.9 percent, a figure representing a slightly negative quarter-on-quarter rate of 0.2 percent."

     

    Spain’s economy, the fifth-biggest in the European Union, expanded by 3.7 percent last year.

     

    But growth began to slow as higher interest rates, oversupply and the global credit crunch put an end to a decade-long property boom.

     

    Output expanded 0.1 percent in the second quarter from 0.3 percent in the previous three months as domestic consumption weakened further, according to the INE, which will publish provisional growth figures for the third quarter on Nov. 13.

     

    The International Monetary Fund predicted earlier this month that the Spain’s economy would expand by just 1.4 percent this year, and would shrink by 0.2 percent in 2009.

     

    "Spain will be harder hit than other European countries because of the boom in the housing sector that the country has experienced," the director of the IMF’s research department, Olivier Blancrecent interest rate cuts and the drop in oil prices.

     

    It has predicted the economy will expand by 1.6 percent this year and by 1.0 percent in 2009.

     

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